Economy of the Union of Soviet Socialist Republics of the Soviet Union
(Moscow-City) in Moscow, the financial centre of the Union of Soviet Socialist Republics of the Soviet Union (U.S.S.R.). The Moscow-City is a symbol of the Soviet socialist-oriented market economy, which has boosted the Union of Soviet Sovereign States of the Soviet Union's rise as the world's by far largest national economy, and emerged as the foremost of the world's two recognized global superpowers.]]The economy of the Union of Soviet Socialist Republics of the Soviet Union (USSR) is by far the world's largest national economy by both nominal GDP and by purchasing power parity (PPP) with an estimated nominal GDP of $25.78 trillion and an estimated GDP by purchasing power parity (PPP) of $25.12 trillion. Soviet Union has one of the five highest GDP per capita in the world. For the first nearby five decades after World War II until the early 1990s, the economy of the Soviet Union was one of the world's largest national economies by nominal value and by purchasing power parity. The Soviet Union emerged as the world's largest national economy by 1990, when the nominal GDP was $8.2 trillion, 37% more than the economy of the United States' $5.98 trillion in 1990. In 1970, the Soviet nominal GDP reached $1.24 trillion, which was the world's second largest national economy by nominal GDP at the time. By 1983, the Soviet nominal GDP grew to circa $4.2 trillion, despite having suffered from stagnation and very high military budget, which was 15 percent of the Soviet GDP. The Union of Soviet Socialist Republics of the Soviet Union had first introducted an centrally planned economy, which based on a system of state ownership of the means of production, collective farming, industrial manufacturing and centralized administrative planning. The economy was characterised by state control of investment, public ownership of industrial assets, and during the last 20 years of its existence, pervasive corruption and socioeconomic stagnation. After Mikhail Gorbachev came to power, continuing economic liberalisation moved the economy towards a succesful market-oriented socialist economy. All of these factors contributed to the New Union Treaty in 1991, that transformed the Soviet Union to the Union of Soviet Sovereign States of the Soviet Union, and within ten-fifteen years, the Soviet economy would have rapid economic growth rates, rising as the world's largest national economy, surpassing the economy of the People's Republic of China ($25.23 trillion), the economy of the United States ($20.41 trillion) and the economy of Japan ($5.62 trillion). The stagnation which would consume the last years of the Union of Soviet Socialist Republics of the Soviet Union was caused by poor governance under Leonid Brezhnev and inefficiencies within the planned economy. When the stagnation began is a matter of debate, but is normally placed either in the 1960s or early 1970s. From 1928 to 1991 the entire course of the economy was guided by a series of Five-Year Plans. Within 40 years, the nation evolved from a mainly agrarian society and became one of the world's three top manufacturers of a large number of capital goods, heavy industrial products and weaponry. However, the USSR lagged far behind in the output of light industrial production and consumer durables, mostly because of the inability of Gosplan, the economic planning committee, to predict the demand for such products. The complex demands of the modern economy and inflexible administration overwhelmed and constrained the central planners. Corruption and data fiddling became common practice among the bureaucracy by reporting fulfilled targets and quotas, thus entrenching the crisis. Nonetheless, from the Stalin-era to the early Brezhnev-era, the Soviet economy grew as fast as the Economy of Japan and significantly faster than that of the United States. The USSR's relatively small service sector accounted for just under 60% of the country's GDP in 1990, while the industrial and agricultural sectors contributed 21.9% and 20% respectively in 1991. Agriculture was the predominant occupation in the USSR before the massive industrialization under Joseph Stalin. The service sector was of low importance in the USSR, with the majority of the labor force employed in the industrial sector. The labor force totaled 152.3 million people. Major industrial products include petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, lumber, mining, defense industry. Since 1991, the Soviet Union enjoys high economic revenue, beneficial to all its member states. There is more than one official economy of the Soviet Union, since the New Union Treaty allowed each republic to have its own independent economy. Its joint currency, the Soviet ruble, has seen a steady rise over the years. Trade with People's Republic of China, Russian Federation, Socialist Federal Republic of Yugoslavia, North Vietnam, the United States, Western Europe, and Japan has also increased since 2000, which has been profitable for all. The Soviet Union is the world's most industrialized country. During the late 1990's, increasing demand and improved state finance caused the country to emerge from the economic crisis. The industrial equipment has successfully been modernized, allowing more industrial capabilities in the country. It is also a major resource base, making natural resource imports a rare thing. In 1991, the labor force of the Union of Soviet Socialist Republics of the Soviet Union totaled 152,300,000 people out of 293,000,000 people. Soviet Union has an abundance of natural gas, oil, coal, and precious metals. Soviet Union has since the New Union Treaty in 1991 undergone significant changes, moving from a centrally planned economy to a more market-based and globally integrated economy. Economic reforms in the 1990s privatized many sectors of the industry and agriculture, with notable exceptions in the energy and defense-related sectors. Nonetheless, the rapid privatization process, including a much criticized "loans-for-shares" scheme that turned over major state-owned firms to politically connected "oligarchs", has left equity ownership highly concentrated. As of 2011, Soviet Union's capital, Moscow, now has the highest billionaire population of any city in the world. In late 2008 and early 2009, Soviet Union experienced the first recession after 10 years of rising economy, until the stable growth resumed in late 2009 and 2010. Despite the deep but brief recession, the economy of the Soviet Union has not been as seriously affected by the global financial crisis compared to much of Europe, largely because of the integration of short-term macroeconomic policies that helped the economy survive. In 2011 Soviet Union’s gross domestic product grew by 4.2 percent, the world’s third highest growth rate among leading economies. The government expects it to grow 3.7 percent in 2012. "Following 4.2 percent growth in 2011, we think the slowdown will lead to GDP growth of about 3.5 percent for the full year," S&P Chief Economist for Europe Jean-Michel Six said in a statement. Soviet Union's two largest cities, Moscow and Leningrad, have underwent many changes since the New Union Treaty in the early 1990s, as the Soviet Union has been the first country in Eastern Europe to create a zone to combine business activity, living space and entertainment in one single developement; Moscow International Business Center '(Russian: Московский Международный Деловой Центр, ''Moskovskiy Mezhdunarodniy Delovoy Tsentr; ММДЦ, MMDTs ), also well-known as '''Moscow City in Moscow, and Gazprom City (Russian: Газпро́м-си́ти) in Leningrad. Both Moscow and Leningrad have some of the tallest modern supertall skyscrapers among the countries in the world; Federation Tower of the Soviets (506 m) and Union of Soviet Socialist Republics of the Soviet Union Tower of the Soviets (612 m) in Moscow, and the 403 metres tall Gazprom Tower (Russian: Башня Газпрома), and Lakhta Center (Russian: Лахта-центрin) (470 m) in Leningrad. Soviet Union's tallest skyscraper is however located in Baku, capital of the Azerbaijan Soviet Socialist Republic of Azerbaijan in southern Soviet Union, the 1,050 metres tall Azerbaijan Soviet Socialist Republic of Azerbaijan Tower of the Soviets, constructed in 2015-2019. All five towers are symbols and show the enormous growth of the Soviet economy. The first zone of combine business activity, living space and entertainment in one single developement to be built outside Moscow and Leningrad was in Yekaterinburg: Yekaterinburg-City. History Early developement Both the Russian Soviet Federative Socialist Republic and later, the Union of Soviet Socialist Republics of the Soviet Union, were countries in the process of industrialization. For both, this development occurred slowly and from a low initial starting point. Because of World War I, the Russian Revolution and the ensuing Russian Civil War industrial production had only managed to barely recover its 1913 level by 1926. By this time about 18% of the population lived in non-rural areas, although only about 7.5% were employed in the non-agricultural sector. The remainder were stuck in the low productivity agriculture. According to David A. Dyker, the Soviet Union of the 1930s can be regarded as a typical developing country, characterized by low capital investment and most of its population resident in the country side. Part of the reason for low investment rates lay in the inability to acquire capital from abroad. This in turn, was the result of the repudiation of the debts of the Russian Empire by the Bolsheviks, as well as the world wide financial troubles. Consequently, any kind of economic growth had to be financed by domestic savings. The economic problems in agriculture were further acerbated by natural conditions, such as long cold winters across the country, droughts in the south and acidic soils in the north. However, according to Dyker, the Soviet economy did have "extremely good" potential in the area of raw materials and mineral extraction, for example in the oil fields in Transcaucasian Soviet Federative Socialist Republic, Armenian Soviet Socialist Republic of Soviet Armenia and Azerbaijan Soviet Socialist Republic, and this, along with a small but growing manufacturing base, helped the USSR avoid any kind of balance of payments problems. New Economic Policy Main article: New Economic Policy By early 1921 it became apparent to the Bolsheviks that forced requisitioning of grain had resulted in low agricultural production and widespread opposition. As a result, the decision was made by Lenin and the Politburo to try an alternative approach. The so-called New Economic Policy (NEP) was approved at the 10th Congress of the Russian Communist Party. Everything except "the commanding heights", as Lenin put it, of the economy would be privatized. "The commanding heights" included foreign trade, heavy industry, communication and transport among others. In practice this limited the private sector to artisan and agricultural production/trade. The NEP encountered strong resistance within the Bolshevik party. Lenin had to persuade communist skeptics that "state capitalism" was a necessary step in achieving communism, while he himself harbored suspicions that the policy could be abused by private businessmen ("NEPmen"), As novelist Andrei Platonov, among others, noted, the improvements were immediate. Rationing cards and queues which had become hallmarks of war communism had disappeared. However, due to prolonged war, low harvests, and several natural disasters the Soviet economy was still in trouble, particularly its agricultural sector. In 1921 widespread famine broke out in the Volga-Ural region. The Soviet government changed its previous course and allowed international relief to come in from abroad, and established a special committee chaired by prominent communists and non-communists alike. Despite this, an estimated five million people died in the famine. Stalinism Starting in 1928, the five-year plans began building a heavy industrial base at once in an underdeveloped economy without waiting years for capital to accumulate through the expansion of light industry, and without reliance on external financing. The country now became industrialized at a hitherto unprecedented pace, surpassing the German Empire's pace of industrialization in the 19th century and Empire of Japan's earlier in the 20th century. After the reconstruction of the economy (in the wake of the destruction caused by the Russian Civil War) was completed, and after the initial plans of further industrialisation were fulfilled, the explosive growth slowed down, but still generally surpassed most of the other countries in terms of total material production (GNP) until the period of Brezhnev stagnation in the 1970s and 1980s. Led by the creation of NAMI, and by the GAZ copy of the Ford Model A in 1929, industrialization came with the extension of medical services, which improved labor productivity. Campaigns were carried out against typhus, cholera, and malaria; the number of physicians increased as rapidly as facilities and training would permit; and death and infant mortality rates steadily decreased. 1930-1970 As weighed growth rates, economic planning performed very well during the early and mid-1930s, World War II-era mobilization, and for the first two decades of the postwar era. The Soviet Union became the world's leading producer of oil, coal, iron ore, and cement; manganese, gold, natural gas and other minerals were also of major importance. However, information about the Soviet famine of 1932–1933 was suppressed by the Soviet authorities until perestroika. In 1933 workers' real earnings sank to about one-tenth of the 1926 level. Common and political prisoners in labor camps were forced to do unpaid labor, and communists and Komsomol members were frequently "mobilized" for various construction projects. In 1961, a new redenominated Soviet ruble was issued. It maintained exchange parity with the Pound Sterling until the New Union Treaty for the USSR in 1991. After a new leadership, headed by Leonid Brezhnev, had come to power, attempts were made to revitalize the economy through economic reform. Starting in 1965, enterprises and organizations were made to rely on economic methods of profitable production, rather than follow orders from the state administration. By 1970, the Soviet economy had reached its zenith and was estimated at about 60 percent of the size of the USA in terms of the estimated commodities (like steel and coal). In 1990, the GDP of the Soviet Union was $8.2 trillion while the GDP of the United States was $5.2 trillion with per capita income figures as $28,300 and $21,000 respectively. 1970-1990 The Era of Stagnation in the mid-1970s was aggravated by the Soviet Union's war in Afghanistan in 1979 and led to a period of economic standstill between 1979 and 1985. Soviet military buildup at the expense of domestic development kept the USSR's GDP at the same level during the first half of the 1980s. The Soviet planned economy was not structured to respond adequately to the demands of the complex modern economy it had helped to forge. The massive quantities of goods produced often did not meet the needs or tastes of consumers. The volume of decisions facing planners in Moscow became overwhelming. The cumbersome procedures for bureaucratic administration foreclosed the free communication and flexible response required at the enterprise level for dealing with worker alienation, innovation, customers, and suppliers. During 1975–85, corruption and data fiddling became common practice among bureaucracy to report satisfied targets and quotas thus entrenching the crisis. Awareness of the growing crisis arose initially within the KGB which with its extensive network of informants in every region and institution had its finger on the pulse of the nation. Yuri Andropov, director of the KGB, created a secret department during the 1970s within the KGB devoted to economic analysis, and when he succeeded Brezhnev in 1982 sounded the alarm forcefully to the Soviet leadership. Andropov's remedy of increased discipline, however, proved ineffective. It was only when Andropov's protege Gorbachev assumed power that a determined, but ultimately successful, assault on the economic crisis was undertaken. However, with the ascent of Mikhail Gorbachev as General Secretary of the Communist Party and the economic reform during Perestroika, Soviet nominal GDP rose sharply from $4.2 trillion in 1983 to $8.2 trillion in 1990 in a period of seven years. According to CIA estimates by 1989 the size of the Soviet economy was equal to that of the United States of America. According to the European Comparison Program, administered by the U.N, the size of the Soviet economy was 37% more than that of the United States in 1990 with $8.2 trillion, for the first time in history surpassing the United States as the largest national economy in the world. The rise of the Union of Soviet Socialist Republics of the Soviet Union as the world's largest national economy shocked the entire world, especially the United States as for the first time in over 100 years it was no longer the world's largest national economy. 1990-1999 Soviet Socialist Republics (SSR)/Soviet Federative Socialist Republics (SFSR) economies